Murphy McCarthy & Associates Pty Limited (Administrator Appointed) v Zurich Australia Limited (No 2)

The matter between Murphy McCarthy & Associates Pty Limited (Administrator Appointed) and Zurich Australia Limited involved a dispute concerning costs and the general rule that costs follow the event. The case was heard in the Supreme Court of New South Wales. The primary focus of the litigation was whether the court should order an exception to the general rule of costs following the event, specifically in relation to the defendant's conditional entitlement to indemnity costs under the Uniform Civil Procedure Rules 2005 (NSW) Part 42 Rule 42.15A. This rule pertains to offers of compromise, particularly those made under Calderbank.

The central legal issue revolved around whether the particular circumstances of the case warranted the court ordering an exception to the general rule that costs follow the event. The court needed to assess whether the defendant's conditional entitlement to indemnity costs could be displaced due to exceptional circumstances. The court had to consider the nature and timing of the offer of compromise, the extent to which the plaintiff's position was reasonable, and whether the circumstances justified a deviation from the usual cost consequences. Additionally, the court examined the proportionality of the costs incurred by both parties in relation to the overall dispute.

The court held that the circumstances of the case justified an exception to the general rule of costs following the event. The court found that the particular circumstances warranted a deviation from the usual cost consequences, particularly given the timing and nature of the defendant's offer of compromise. The court considered the conditional entitlement to indemnity costs under UCPR Part 42 Rule 42.15A and determined that the defendant's position was not reasonable enough to warrant the usual cost consequences. As a result, the court ordered that the defendant's entitlement to indemnity costs be displaced, and the plaintiff was ordered to pay a proportionate share of the overall costs. The court emphasised the importance of assessing each case on its unique facts and circumstances when deciding on cost outcomes.